Ethiopia; Export Extraordinaire

Although it is the second most populous country in Sub-Saharan Africa, Ethiopia has the lowest ratio of merchandise exports to GDP in the world. Historically, Ethiopian industry has been unable to develop into a world player, held back by a variety of economic problems. This is now changing however, as a World Bank report published this week reports positive statistics.

Ethiopia’s development model is partly inspired by the East Asian experience that realised high economic growth through the development of new export sectors and government-led development investments. Benefiting from a global commodities price windfall in the 2000s, Ethiopian exports grew at one of the highest rates in Sub-Saharan Africa. In tandem, GDP grew 9.7% in 2012/13.

According to this study, a large part of this comes from the comparative advantage Ethiopia possesses in over 80 goods and services in Africa. Many of these, such as horticultural goods, sesame seeds, soy beans and footwear, have seen considerable export growth over the last year. Ethiopia’s nascent manufacturing industries are also beginning to grow rapidly from a low base, after being positively affected by changes in the global trade regime and
the introduction of new trade preferences.

Exports and imports of goods and services as a share of GDP increased from 37.5 percent in 2001/02 to 48.7 percent in
2011/12. This figure remains low, though, considering the projected growth curve, so it is safe to assume that it can only go up from here. The major investor in Ethiopia today is China,  which which the value of trade topped $200bn last year.

Indeed, China is completing changing the dynamics of trade within the entire region. Premier Li toured 4 major East African nations last year, where he renewed an offer of $20bn in loans to Africa between 2013 and 2015. In Ethiopia, Chinese firms have invested heavily in recent years with their worth swelling well over $1bn in 2014, according to official figures. Beijing is also a key partner in Ethiopia’s bid to expand infrastructure such as roads, railways and telecom services.

The growth of Ethiopia thus, looks to signal a change in global trade patterns, with a new axis of development avoiding Western nations altogether. Rarely has such growth been sustained, yet the future looks bright for now, particularly in light of the slow and asymmetric recovery in the EU & US. The core of this growth will require steel, particularly the construction industry, which accounted for 25% of all economic activity in China over the last 10 years. Chinese steel firms eager to develop relations with this part of the world to fulfill this promise mutual growth.

For more information about SMC, follow us on twitter @Shanghai_Metal

Lloyd P.//SMC Editor

 

 

 

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